Melbourne's CBD vacancy rate has increased y-o-y from 11.9% to 15% as tenants move up the quality curve.
This is reflected in the vacancy movements of Premium and B-grade assets, with Premium decreasing and B-Grade increasing in the same timeframe.
New stock injections also impacted the total vacancy rate. However, Melbourne's 2023 development pipeline is smaller compared to previous years.
Like Sydney, many agent reports predict that a reduction in new supply, coupled with higher demand, will see the market slowly recover. However, we can't see that happening until 2026 at the earliest.
While face rents have remained stable, they're still being capped by higher incentives, which have risen across all grades. Premium incentives now sit at 40%, and A and B-Grade at 42%. This has led to a quarter-on-quarter decrease in net effective rents for Premium and A-grade assets.
Melbourne CBD’s sublease availability is being reported at 112,821 sqm, 2.2% of total stock. We're finding that many larger companies are still looking to sublease their excess space. The deals being offered will attract companies looking for larger floor plates and high-quality modern fit-outs on relatively low rents and long lease tails.
High subleasing availability is expected to remain throughout 2023-24.
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